Meb Faber’s Ivy 10 portfolio is an expansion of the Ivy 5 portfolio. The portfolio attempts to mirror the portfolios of large endowment funds like Yale and Harvard. The portfolio of large endowments has been heavily influenced by David Swensen of Yale. His approach is to diversify into alternative asset classes like natural resources (timber), real estate, and private equity. Meb Faber and Eric W. Richardson’s have looked over the shoulders of David Swensen and other fund manager and have constructed the Ivy Portfolio. They present the asset allocation in their book The Ivy Portfolio: How to Invest Like the Top Endowments and Avoid Bear Markets.
Meb Faber’s Ivy 10 Portfolio: Expand And Conquer Yale And Harvard
- 1 Meb Faber’s Ivy 10 Portfolio: Expand And Conquer Yale And Harvard
- 2 Asset allocation piechart for Meb Faber’s Ivy 10 Portfolio
- 3 Returns and risk for the Ivy 10 portfolio
- 4 Building the portfolio
- 5 Advantages and disadvantages of the Ivy 10 portfolio
- 6 Resources
- 7 Summary and your next steps
Asset allocation piechart for Meb Faber’s Ivy 10 Portfolio
Returns and risk for the Ivy 10 portfolio
|Portfolio Name||Number of asset classes||1 year return 2018||YTD (September 2019)||10 year return||Drawdown||Risk Level||Market Correlation||Dollar Value|
|S&P 500 (Benchmark)||1||-4.52%||20.36%||12.97%||-37.71%||5 - very high risk||0.99||$167,045.76|
|Meb Faber Ivy 10 Portfolio||9||-8.56%||11.28%||6.25%||-33.41%||4 - high risk||0.73||$93,889.37|
Building the portfolio
Below you can see which mutual funds or ETFs you can use to build the portfolio. They are the best-in-class funds and ETFs for this purpose. They are low-cost index funds that best capture the asset class. Read here how we selected the best funds.
Asset allocation for the Ivy 10 portfolio
- 10.00% US Large Cap (VV)
- 10.00% US Small Cap (VIOO)
- 10.00% REITs (VNQ)
- 10.00% International Developed Blend (VEA)
- 10.00% Emerging Markets (VWO)
- 10.00% Total US Bond Market (BND)
- 20.00% Commodities (DBC / GSG)
- 10.00% TIPS (VTIP)
- 10.00% International REITs (VNQI)
Meb Faber and Eric W. Richardson propose the using the following ETFs:
Advantages and disadvantages of the Ivy 10 portfolio
- Simple to understand, 10 funds split equally.
- Better diversified and more chances to rebalance than the Ivy 5 portfolio. Thereby reducing risk and increasing returns.
- Global and well diversified
- Constructed by Meb Faber – a respected financial quant that almost single-handedly has revived market timing.
- Makes a bet on commodities.
- You get a portfolio that resembles that of Yale and Harvard. David Swensen of Yale has had astonishing returns using a similar model.
- The bet on commodities may not be desirable.
- The inclusion of commodities makes the portfolio slightly more expensive due to the higher expense ratio of commodity ETFs.
- May be too heavy on hard assets such as commodities and REITs (30% in total). They have done great in the past but their performance may not continue.
- May not be suitable for some as the premise for the endowments holding a similar portfolio is holding the assets “forever”. Private investors do not have forever. Most have between 5-50 years.
Go here for a rebalance excel worksheet.
Also be sure to visit Meb Faber site. It is a wealth of information and inspiration. His podcast is also very good (the first episode is absolutely awesome as he runs down what investing is really about.
Summary and your next steps
The Ivy 10 portfolio is a well-diversified global portfolio that expands on the Ivy 5 portfolio. For the past 10 years, it has performed a little better than the Ivy 5 portfolio. Implementing the Ivy 10 portfolio gets you in the club with the large endowment like Yale and Harvard.
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